Co-pay & Deductible
Co-pay and deductible — the two main ways a health policy makes the policyholder share the cost of a claim — how each is calculated, how they combine with each other and with room-rent limits, and who collects them.
Two forms of cost-sharing
A co-pay is a fixed percentage of the claim amount that the policyholder pays from their own pocket. It applies to every claim made during the policy year; it is not a one-time deduction. With a 20% co-pay on a claim of ₹3,00,000, the policyholder pays ₹60,000 and the insurer the remaining ₹2,40,000.
A deductible is a fixed amount of money, not a percentage. It is a threshold below which the insurer does not pay: the policyholder bears all expenses up to that amount and the insurer covers only the excess. Top-up and super top-up plans are built on this idea.
Both reduce what the insurer has to pay, and so both lower the premium.
Where they are found
Whether a policy carries a co-pay or a deductible, and at what level, is decided by the product; IRDAI does not fix the figures. Many senior-citizen health plans carry a co-pay, reflecting the higher claim frequency and medical costs at older ages, and the percentage varies by product. Arogya Sanjeevani, the standard health product, has a 5% co-pay on every claim under its standard terms.
The Customer Information Sheet that comes with every policy shows the deductibles and sub-limits that apply, so the terms can be seen before a claim arises.
When more than one deduction applies
A policy can have a deductible and a co-pay together. The order in which they are applied is set by the policy wording, and the order changes the answer, as the worked example shows.
A co-pay can also sit alongside a room-rent cap. Both reductions can then apply to the same claim and compound the policyholder's out-of-pocket expense. Here too the wording decides the order and the amounts each is applied to.
Paying it, and weighing it
In a cashless claim the insurer settles only its share with the hospital. The hospital collects the co-pay portion directly from the patient at the time of discharge.
A plan with a co-pay usually has a lower premium than a similar plan without one. In a year with no claim the lower premium is the whole story. In a year with a large claim, a 20% co-pay can run to lakhs of rupees, which can exceed the premium saved. Which outcome a policyholder meets depends on the size and number of claims, and that cannot be known in advance.
Rules at a glance
A lower premium and a large claim
Illustration, with invented figures: Plan A costs ₹18,000 a year and has a 20% co-pay; Plan B costs ₹23,000 and has none. In a claim-free year the holder of Plan A has paid ₹5,000 less. Now assume an admissible claim of ₹3,00,000. Under Plan A the co-pay is 20% × ₹3,00,000 = ₹60,000, twelve times the ₹5,000 saved; under Plan B it is nil. The premiums are made up for the illustration; actual premiums are set by each insurer.
Deductible first or co-pay first
- Assumptions, for arithmetic only: admissible claim ₹4,00,000; deductible ₹50,000; co-pay 20%.
- If the wording applies the deductible first: ₹4,00,000 − ₹50,000 = ₹3,50,000.
- Co-pay on the balance = 20% × ₹3,50,000 = ₹70,000. Insurer pays ₹3,50,000 − ₹70,000 = ₹2,80,000. Policyholder bears ₹50,000 + ₹70,000 = ₹1,20,000.
- If the wording applies the co-pay first: 20% × ₹4,00,000 = ₹80,000, leaving ₹3,20,000.
- Deductible next: ₹3,20,000 − ₹50,000 = ₹2,70,000 paid by the insurer. Policyholder bears ₹80,000 + ₹50,000 = ₹1,30,000.
Result. The insurer pays ₹2,80,000 when the deductible comes first and ₹2,70,000 when the co-pay comes first: a ₹10,000 difference that turns only on the order in the wording.
Key points
- Co-pay is a percentage of each claim borne by the policyholder; a deductible is a fixed amount borne first.
- Co-pay applies to every claim in the policy year.
- Where a policy has both, the order of applying them is set by the wording and changes the result.
- Co-pay and a room-rent cap can both apply to one claim.
- In a cashless claim the hospital collects the co-pay from the patient at discharge.
Common misunderstandings
- Co-pay is not a one-time charge: it is deducted from every claim in the policy year.
- A deductible is not a percentage: it is a fixed amount below which the insurer pays nothing.
- A lower premium is not automatically the lower cost: with a co-pay, a large claim can cost more than the premium saved.
- Cashless does not mean the insurer pays the co-pay: the hospital collects it from the patient at discharge.
Questions people ask
Does a 10% co-pay apply only to the first claim of the year?
No. Co-pay is applied to every claim made during the policy year.
Why do many senior-citizen plans have a co-pay?
It reflects the higher claim frequency and medical costs at older ages. The percentage varies by product.
If a policy has a co-pay and a room-rent cap, which applies?
Both can apply to the same claim. The order, and the amounts each is applied to, are set by the policy wording.
What this lesson relies on
- IRDAI Master Circular on Health Insurance Business (29 May 2024) — Customer Information Sheet
- Arogya Sanjeevani — standard product terms as published in insurers' product documents
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.